RACHEL MADDOW, HOST: Hey, Rachel—hey, Lawrence, I wanted to tell you that your rundown—your rundown of tape and sort of tick tock about what happened today and the tension right now in Egypt was the single best two minutes of cinematography I‘ve seen all day in terms of encapsulating what happened. I thought it was just brilliant. Congratulations to you and your staff on that.

LAWRENCE O‘DONNELL, “THE LAST WORD” HOST: Produced as always by John Nichols, I get no credit.

MADDOW: It was excellent. Thanks, Lawrence.

O‘DONNELL: Thanks, Rachel.

MADDOW: Thanks to you at home for staying with us for the next hour.

The reason that Tahrir Square filled up again today and those astonishing scenes that we saw all day long, the reason that every news network went into rolling coverage all day long today, the reason for the anticipation that today would be the last day of that government was because at around 10:00 a.m. Eastern Time in the United States today, which is about 5:00 p.m. in Cairo, the military in Egypt did stuff. They took actions that were widely understood to indicate that they would finally be stepping in to end this thing.

We have known since the beginning that the military is key to how this uprising gets resolved, to who wins and to how that happens. But until today, the military had kept to their promise to basically stay on the sidelines. Other than to say they would not fire on the people, they had not made any political statement until today.

The reason today went like it did is because there was a meeting of Egypt‘s supreme military body today—a meeting without Hosni Mubarak. The high council of the armed forces met for only the third time in history. They met in 1967 during the six-day war. They met in 1973 during the Arab-Israeli war. And then they met today.

Before they met, the chief of staff of the armed forces personally went to Tahrir Square, and he promised the protesters in person that the protesters‘ demands would be met. What is their main demand? That President Mubarak must go.

The chief of staff of the military, when he announced to the protesters that their demands would be met, his announcement was greeted with wild cheers in Tahrir Square. The army commander for Cairo was carried around Tahrir Square on protesters‘ shoulders today after he, too, promised them in person that all of their demands would be met.

After the military council meeting today at around 5:00 p.m. local time in Egypt, the military released a statement. They titled it “Communique Number One.” The statement said they were taking necessary measures to protect the nation and to support the legitimate demands of the people. That‘s why today went the way it did.

For weeks, we‘ve been waiting to see what the military would do, who they would side with. When they met and they made their statement and they talked to the protesters and they left Mr. Mubarak and Mr. Suleiman on the sidelines, the word rocketed from Cairo to the rest of the world that the military was stepping in. And the military had apparently taken the side of the protesters.

And then the crowds in Tahrir Square began to swell. Because of what happened later tonight, this dynamic is being lost. But I still think it‘s the most important thing for understanding what will happen next. The people believed President Mubarak was going to step down tonight because the military implied through this rare council meeting, through the public meetings with the protesters, through the broadcast of this nationwide communique that they were making decisions without Hosni Mubarak. That he had been sidelined, that his time was effectively over.

When Mr. Mubarak gave his speech saying he would not step down, he was, in effect, a man shouting from the sidelines.

If what we woke up to today is still true, if the military is now a political actor, if they are in effect taking over, then what Mr. Mubarak said and what his vice president, Omar Suleiman, said tonight is largely irrelevant. They were big words from hollow men. We will know if they really are clinging to power when we hear next from the Egyptian military.

Has the military split from Mr. Mubarak, or haven‘t they? We got “Communique Number One” at around 10:00 a.m. Eastern Time today. We await communique number two.

Joining us on the phone is Egypt‘s ambassador to the United States, Mr. Sameh Shoukry.

Mr. Ambassador, thank you so much for joining us this evening.

Let me ask you first to correct me if anything that I‘ve just said is incorrect or if I have any of my facts wrong.

AMB. SAMEH SHOUKRY, EGYPTIAN AMBASSADOR TO U.S. (via telephone):

Maybe just one. First of all, thank you for having me.

MADDOW: Sure.

SHOUKRY: Maybe one—you made reference to the chief of staff was in the square today. There‘s been a denial. He was not in the square.

But I understand that there‘s a lot of rumors, it‘s a tense situation. There are many people involved, and a lot of misinformation sometimes gets out. So, it‘s—no fault of yours.

MADDOW: We have seen photos of military officers in Tahrir Square today. If there‘s a denial that it was the chief of staff of the military, we‘ll make every effort to correct that and to identify these officers who we‘re showing now on television. They‘re speaking with the protesters, greeting them. The protesters obviously saw them as speaking for the military.

When they did that, were they acting independently? Were they acting only on their own terms? What should we take that overture to the protesters to mean from the military?

SHOUKRY: All through these demonstrations, the military has been in contact with the demonstrators. It‘s been providing them logistic support and protection, and there have been on many occasions personnel from the military in the midst of the demonstrators. I don‘t have any specific information of what their message, the message they were conveying to them. But I‘m not surprised that they were there.

MADDOW: Is the vice president, Mr. Suleiman, in command of the military right now?

SHOUKRY: Yes, he is. By virtue of the transmittal of all the authority of the office of the president to Vice President Suleiman, he has now assumed all the responsibilities of the president as stipulated in the constitution.

MADDOW: When the armed forces met today, the supreme council of the armed forces, when they issued this “Communique Number One,” saying that they would be taking action to, in effect, act in support of the protesters‘ legitimate demands that they described as legitimate demands, were they acting on civilian orders when they did that or were they acting as a military independently?

SHOUKRY: Well, that‘s a statement that‘s being reiterated by the council. They‘ve made previous statements the level of the chief of staff and other high-ranking military officials that they were in protecting the legitimate rights of the demonstrators and the Egyptian people. So, I think it was a reiteration that maybe was read into a conscious decision to follow up with actions.

I think at this stage, it‘s better not to speculate and to await any further communiques that might be issued.

MADDOW: To be clear, what you are saying is there is no split between the military and Mr. Suleiman.

SHOUKRY: I‘m not aware of any.

MADDOW: OK.

Earlier this evening, you said that Vice President Suleiman was now the de facto president. Mr. Mubarak remains president in name only. Can the powers of the presidency be transferred back to Mr. Mubarak?

SHOUKRY: I think that‘s an issue of constitutional law that is a little bit intricate and is open for many interpretations. But I think the decision of the president should be taken in the context of the totality of his speech, which was an indication that he was—undertaking this decision in response to the demonstrators‘ call and in response to the dangers that Egypt was facing.

MADDOW: What powers does Mr. Mubarak retain with the title of president, which he is holding on to?

SHOUKRY: Well, he‘s transferred all powers to the vice president. So, all powers now are assumed by the vice president and rest in his person.

MADDOW: What is the point of him being president with no power?

SHOUKRY: I think it‘s an application and an interest that‘s a peaceful transition of power happens within the constitutional legitimately. If—under other circumstances, there would be a difficulty in undertaking the reform process in accordance with the constitution. And that might be the reason why.

MADDOW: Sir, the one thing that is hard to understand about that, if this has been done in order to retain the sort of constitutional legitimacy of the government right now, as far as I understand it, there is nobody right now who is empowered to amend the constitution. That was in Mr. Mubarak‘s power, it no longer is. It is also no longer—it also not in Mr. Suleiman‘s power.

SHOUKRY: Yes. But the president indicated in his speech that before he transferred power to Vice President Suleiman, he had made the request to parliament to amend those articles of the constitution that have been recommended to him by the constitutional reform committee so that he has, in effect, sent to parliament for their consideration of those amendments. Those are the amendments upon which the reform process will go ahead and upon which free and fair elections will be held in September.

MADDOW: The elections that have happened under Mr. Mubarak‘s reign, particularly the last elections, are widely viewed throughout the world as a farce, are not seen as free and fair elections. What will the government do if they‘re allowed to even stay in power that long, to give people confidence that any elections they might schedule for the future would be any more fair than the ones that the Egyptian people I think, by and large, feel have not been fair in the past?

SHOUKRY: Well, one of the things that came out of the national political dialogue that the vice president held was all segments of the opposition was accepting the obligation that the judiciary would look into the—those seats that were contended as being fraudulent and to rectify that situation in an immediate manner. That is a commitment that was made by the president, by the vice president, that was endorsed by the consensus of the opposition with Vice President Suleiman, and which everything indicates will go ahead as planned.

MADDOW: I don‘t know if the phrase “too little too late” is something that is too American a phrase to have resonance beyond our shores. But the pace of reforms that you are describing that the president laid out in his speech today are not at all the sort of thing that the protesters in the streets of Egypt seem to be calling for. They are calling for massive change, including Mr. Mubarak no longer being president now. And they intend by all appearances to be out in the streets by the hundreds of thousands, if not by the millions tomorrow to demand that.

Under what circumstances would President Mubarak and Vice President Suleiman do what the people are asking for her?

SHOUKRY: Well, in the final context, it is the legitimate right of the people to demonstrate and to indicate what they consider to have fulfilled their aspirations. And they will do so under the protection of the military in all freedom. And it is up to every government to ascertain what the direction and aspirations of its people are and to respond to it. There has been an effort to respond, and it is up to the people to determine whether it is sufficient or insufficient.

MADDOW: I have one last question for you, Mr. Ambassador. The protesters have been huge in number. By and large, they have been extremely peaceful last week. It was pro-government forces that attacked protesters and journalists. I say that with confidence because our journalists both witnessed it and in some cases suffered from it.

When Mr. Mubarak spoke about avenging that bloodshed—is your government even cognizant that the protesters and most of the world blame him for that violence that he now says he‘s going to avenge?

SHOUKRY: I think it was clear from the political process. There‘s consensus that those who are responsible for the violence that occurred on Wednesday should be brought to justice. And it‘s been reiterated time and time again that the government will do everything possible to have a full and transparent investigation. And to hold accountable anybody that‘s implicated in this violence.

MADDOW: Egypt‘s ambassador to the United States, Mr. Sameh Shoukry, it was a difficult job in the best of times and a very, very difficult job tonight—thank you very much for joining us, sir.

SHOUKRY: Thank you very much.

MADDOW: Joining us now live from Cairo is NBC News chief foreign correspondent Richard Engel.

Richard, thank you for staying with us. Let me just ask you to reflect or respond to what the ambassador said their, holding fast to the government‘s line that there will be essentially a slow process of reform and investigation and constitutional dialogue and process. How does that resonate in Cairo?

ENGEL: Well, I think that‘s what they‘re going to be doing tomorrow -

it‘s already tomorrow here—is trying to explain what just happened over the last several hours to the demonstrators, trying to build confidence, to tell the demonstrators, look, you wanted Mubarak to step down, he‘s transferred all of his authorities. They are trying to put him out to pasture so to speak.

I wouldn‘t be surprised if President Mubarak actually ends up in a fairly short amount of time in Sharm el-Sheikh, hoping that out of sight, he was also be out of mind and that this reform process can go underway.

What you heard from the ambassador is a—the most—among the most concrete statements we‘ve heard so far about how this is supposed to take place. That Suleiman manages the day-to-day affairs of the country, there are all these constitutional amendments, and that there are these investigations underway to answer the protesters‘ demands.

The protesters right now were expecting something different. They were angry. They were upset. They were gathered in the square waiting to hear something else.

They weren‘t the only ones. We also spoke with several members, several people who were very close to President Mubarak himself. They also expected to hear something different from the president. Their understanding was that the president, as we reported all day, would be stepping down.

The president didn‘t step down. Instead found this half measure. And now, the government is going to be presenting this half measure saying to the people, well, isn‘t this enough, isn‘t close enough that we can move on?

MADDOW: I‘ve been thinking about those sources all day today, Richard, because we had sources, as you say, close to President Mubarak. Not close to President Obama, close to President Mubarak, people who were telling us—multiple sources who are telling us from positions of relative authority in Egypt that Mr. Mubarak should be expected to step down. It was multiple sourced. It was multiple news organizations who were reporting it.

Somewhat famously, Leon Panetta said the CIA was also hearing the same thing. And he said so openly today.

Is it possible that all of those people were right when they said those things, and then Mr. Mubarak just changed his mind?

ENGEL: That is exactly what we believe happened, that there was an understanding going into the start of the day that President Mubarak would make this, quote, “elegant exit” was an expression that we‘ve heard used. And that at some stage in the day, he looked himself in the mirror, he met with his advisers and he decided he‘s not going to do it. He decided that he wanted to try this half measure instead where he gets to go off into the night, and sort of get forgotten about and remain his—remain his—keep his legacy intact.

The one thing I think that—the one word that people have such a grievance with is president. If he had done what he said tonight and said “I am just Mr. Mubarak,” it would have been very different tonight. But keeping that title, keeping these vestiges of power while also claiming to hold—to hand them over to Omar Suleiman, that‘s what doesn‘t ring true people. How do you say, well, I‘m not president anymore, but I‘m still president? That is the problem.

MADDOW: Richard, on the critical question of who the military is siding with, and whether or not there is a split between the government and the military, Ambassador Shoukry essentially just told me, yes, it‘s just sort of like an episode of “Three‘s Company,” it‘s all been a big misunderstanding. The chief of staff didn‘t really tell the protesters that their—the military chief of staff didn‘t really tell the protesters that their demands would be met. Any appearance that the army might have been siding with the protesters, which gave way—gave rise to so much of the expectation of today, was just a misunderstanding. That‘s just—it was just a continuation of the sorts of things the army has been saying all along.

He says there‘s absolutely no split between the military and the government. What‘s your reaction to that?

ENGEL: I could quote a U.S. official we spoke to about this not long ago. He said that the military is largely united in the idea that he should step down. That the military is feeling the pressure, but that President Mubarak believes in his heart that he can wait this out and that this problem will go away, and that the military wants Mubarak to have an elegant exit, an elegant out, and that he has not.

The military doesn‘t want to stand against him. They don‘t want to throw him out. They would much rather have this go smoothly.

They don‘t want to upset the institution. He is part of their own institution. So, they would prefer this happen very smoothly.

And I think there are a lot of people in the military who are hoping that this demand, this—these steps which wasn‘t what some of even President Mubarak‘s closest advisers were expecting, hoping that that would be enough so that this situation can calm down and go forward. But it doesn‘t seem like it is going to be enough when you speak to the protesters. Their expectations were high. They—they‘re going to come out tomorrow in big numbers.

We are just a couple of hours away from the dawn of the day in Egypt that promises massive protest. And, frankly, we are not sure what else. Back to central Cairo when we come back.

(COMMERCIAL BREAK)

MADDOW: We go live to Tahrir Square next. Stay with us.

(COMMERCIAL BREAK)

MADDOW: Joining us now live on the phone from Tahrir Square is senior producer for “Democracy Now,” Sharif Kouddous, who has been with the protesters for days now and who has joined us several times in the last few days to help us with our reporting.

Sharif, thank you very much tonight.

SHARIF ABDEL KOUDDOUS, DEMOCRACY NOW (via telephone): Thank you for having me, Rachel.

MADDOW: Sharif, what‘s difference among the protesters now, after the anticipation that Mr. Mubarak would resign was not realized?

KOUDDOUS: Well, just hours—Rachel, just hours ago, there was jubilation in the streets, shooting in the air. People were really expecting that tonight would be the night when Mubarak spoke.

You know, I never heard a crowd so big become so quiet so quickly. Everyone was listening, huddled over earphones, radio earpieces. And you could hear Mubarak‘s voice crackling over the loud speakers.

And then when it became clear he was not stepping down, it was first sadness and then anger, and then defiance. Many hundreds held up their shoes in the air, and in a show of disgust at what he had to say. And after that, people began chanting again, “Erhal, erhal,” which means “leave.”

And so the crowd is settled down somewhat now. But there has been a march to the TV building, a few hundred protesters have camped out in front of the TV building, which is essentially the propaganda arm of the regime. Several have marched over to the presidential palace.

And tomorrow, by all accounts, it‘s expected to be a massive day here in Tahrir Square. And not just in Tahrir Square, but in the streets of Cairo, all around the city, people are expected to take to the streets. We have yet to see what‘s going to happen.

MADDOW: Sharif, before the speech aired tonight, we were sitting in our newsroom, and the view from here, the view at least from one newsroom in New York City was that if Mubarak disappointed that jubilant, emotional, volatile crowd, that there would be a very dangerous situation on hand among them—that the disappointment of the people would be manifest in a situation that became unsafe, that became potentially violent, that became certainly something that you might not want to be out in the middle of it.

It doesn‘t seem like it ended that way. It seems like, as you say, the crowds thinned out, relatively peacefully. There do not seem to have been major clashes. To what do you attribute the sort of peaceful dissipation of all of that emotional energy that you just described?

KOUDDOUS: Well, Rachel, this has been a peaceful uprising since the very beginning. The only violence that‘s come from the regime, people have fought back and defended themselves against the silence. And we saw another peaceful response tonight.

There was certainly anger. There was a great disappointment. There was sadness. But it was a controlled anger.

And people were defiant and they remained, you know, chanting against Mubarak. And what‘s amazing is as I‘m standing here, it‘s—the crowd has thinned somewhat, but there‘s still thousands and thousands of people here in Tahrir Square, and there‘s still—you know, there‘s a group in front of me right now, I can see right now 50 people, chanting—chanting away. Not for any camera or for anyone to see, but for their own spirits.

And so, they remain resolute. They have found their voices. And they say this is their chance and they‘re not going to give up.

MADDOW: Sharif, let me ask you one last question. Egypt‘s ambassador to the United States just told me there is no split between the government and the military. And that any words of encouragement, any words interpreted as encouragement for the protest today from the military were just a continuation of the kinds of things that the army has said in the past.

Is that congruent with how you have seen it? Is that the way those words from the army today were seen in Tahrir Square?

KOUDDOUS: Well, the military people are very encouraged when that statement came out. There was very loud cheers from the crowd. The crowd went wild when the military said that all the protesters‘ demands were going to be met.

The people here continued to see the military as an ally—even though I must say, Rachel, the military has detained hundreds if not thousands of people here, activists, and there‘s been reports of torture, as well. So, the military is with the regime, in many respects. But people hope that at some point—and they believe that the military will break from the regime and support them instead.

MADDOW: Sharif Kouddous, activist and senior producer for Democracy Now, and a man who needs no sleep at all—Sharif, thank you again for your time. Stay safe, my friend.

KOUDDOUS: Thank you for having me, Rachel.

MADDOW: Joining us now is Juan Cole, professor of history at the University of Michigan, and author of the book “Engaging the Muslim World,” and somebody who I‘ve really enjoyed talking to about the number of issues in the Middle East over the years—Professor Cole, it‘s nice to see you.

JUAN COLE, AUTHOR, “ENGAGING THE MUSLIM WORLD”: It‘s so great to be here, Rachel.

MADDOW: When Sharif talked there about the protesters in Tahrir Square hoping that the military will split from the government and side with them, that is a split obviously that the protesters and many people around the world thought already happened today. It does not seem to have happened.

What‘s your take on this?

COLE: Well, the military has been distancing itself from Mubarak over time for some time now. Soon after the protests began, the army chief of staff, Lieutenant General Sami Annan came out and said the army, under no circumstances, was going to use force against the crowd.

MADDOW: Yes.

COLE: And what we saw today was the other generals in the kind of their equivalent of the Joint Chiefs of Staff, and coming out and making it very clear that they wished that Mr. Mubarak would step down. So, it‘s been incremental.

But as long as the army won‘t interfere against the crowds, it‘s declaring a kind of neutrality, but that neutrality helps the crowds and hurts Mr. Mubarak. So, that decision is already seems to have been made.

MADDOW: When Mr. Mubarak says he‘s still president, Mr. Suleiman as vice president has all of his authority. The military has this purported neutrality although they seem to be at least winking at the protesters. What does that tell you about the sustainability of the government‘s—the government‘s ability to cling to power? I mean, when Mr. Mubarak says he‘s still in charge, I sort of feel like saying, well, yes, you and what army?

COLE: Well, Mr. Mubarak seems to be invested in his legacy and his reputation in his face. And he won‘t step down. He doesn‘t want to be forced into exile. He said he wants to be buried in Egypt.

And for him, you know, he‘s been an autocrat for so many years. He‘s the one who‘s made these decisions. And he just can‘t seem to let go.

And I‘m sure that everybody else is sort of pushing him and saying, please, let go. But he won‘t do it. And he‘s presented the regime with a dilemma, because the next big thing that‘s going to happen is that the crowds are going to come out, and very large numbers tomorrow, likely.

And this thing has been spreading. The public sector employees have been kind of on the fence. Yesterday, they came out. The employees in the Suez Canal company, who are relatively well off, they struck. Down in the city of Asyut, and workers who cut off the main highway to the capital and brought palm trees and set them on fire.

So, this is something that‘s going on all over the country, it‘s spreading to labor movements in other cities, in provincial cities. It‘s not dying down, it‘s growing bigger and bigger. And so, unless Mubarak steps down, it seems that there is a potential for conflict, for confrontation, and ultimately for radicalization. And nobody wants to see that.

MADDOW: If there is confrontation, who are the two sides, protesters on one side, who on the other?

COLE: Well, you know, what if—what if the protesters start marching towards the presidential palace? Which some of them have talked about doing. There is a presidential guard. It‘s not on the same page, necessarily, with the rest of the military. What if it fires on the protesters, and you get a black February and martyrs. And, you know, from there, it can spin out of control.

The army would like to stay neutral. But if it‘s attacked, it will fire back. So, it‘s very dangerous what Mr. Mubarak did today, raising expectations and then dashing them.

MADDOW: Juan Cole is professor of history at the University of Michigan. He‘s author of the book “Engaging the Muslim World”—Professor Cole, it is really nice to see you. Thank you for your insight.

COLE: Thank you.

MADDOW: We will be right back.

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MADDOW: The Egyptian military, as an institution, is powerful and rich and part of the ruling class in Egypt due in large part or at least in significant part to American largess. The United States gives the military roughly $1.3 billion annually.

That largess toward the military started mainly because of one thing, the Camp David Accord signed in 1978. Camp David, of course, led to Egypt signing a peace treaty with Israel the following year.

So the power and the wealth of the military in Egypt, in large part, derive from that country making peace with Israel. If the military wants to stay rich and powerful, why would it risk the source of that?

Why do we keep hearing these dark hints that peace with Israel would be at risk if Egypt goes into some kind of military receivership?

The Egyptian military is probably more invested in keeping peace with Israel than any other institution in the whole country. That said, on Sunday, the Israeli parliament increased its defense budget by $190 million.

And the prime minister ordered the army to speed up construction of a 13-foot tall radar-monitored fence along Israel‘s border with Egypt. Egypt‘s defense budget last year was about $4.5 billion. Roughly a quarter of that was American aid.

That, again, is predicated on this country having a peace deal with Israel. So why the suspicion that if the Egyptian military takes charge, that peace agreement would be at risk?

Joining us now is Shibley Telhami. He is the Anwar Sadat professor for peace and development at the University of Maryland. He is also a non-resident senior fellow at the Saban Center at the Brookings Institution. Professor Telhami, thank you for joining us again tonight.

SHIBLEY TELHAMI, ANWAR SADAT PROFESSOR FOR PEACE AND DEVELOPMENT,

UNIVERSITY OF MARYLAND: My pleasure, always.

MADDOW: Is the military key to understanding what happens next in Egypt?

TELHAMI: No question. I think, obviously, first and foremost, it depends on the people. What you have is - this is incredible. This is really a revolution of the people, and I‘ve never seen anything like it in all the years.

And I‘ve never seen a historical period that resembled what we have seen, this incredible empowerment. The military is important. It‘s important because obviously, any transfer of power is going to come with their consent.

And clearly, if the crowd swelled to more, and there are challenges, they‘re going to be tested in ways they have not so far. If they fire, they lose the public, and they get on a course that is going to be disastrous.

If they don‘t, they don‘t know what will come of it. So there‘s no question that they‘re central. But today, really, was very strange. Because the communique that was issued was reminiscent of the days of military coups.

We have historically seen that in the Middle East. Communique number one, and then to be followed by number two and number three and number four, usually when you take over.

And then, obviously, all of the expectations where the president was going to relinquish power, it didn‘t happen. So it is a very strange day. And I know I‘ve heard Ambassador Shoukry say that there is no division.

Ambassador Shoukry is an excellent diplomat who served this country and would continue to do so. But if there was a division, he would know. The events were particularly strange, because there was also a delay in the president‘s delivery of the speech by about 45 minutes.

So something happened there. We don‘t know what it is. And the next few hours are going to be very critical.

MADDOW: In terms of understanding the military‘s incentives here, because I agree with you that something happened, that number of sources that were telling not only NBC News, but also every other - but every other asset organization - every other asset in the world looking for information about what was going to happen.

The number of sources saying that Mubarak was going to step down is too many and too varied for that not to have been the real expectation. That then suddenly changed. And there was that delay, and so much is still unexplained.

I feel like understanding the military‘s incentives is maybe the only way to understand what‘s going to happen here. I know that the military has significant investment in a lot of different parts of the Egyptian economy.

They‘re estimated to control anywhere from between five percent and 40 percent of the Egyptian economy. They‘re insinuated into every conceivable industry, including tourism.

Could that affect the incentives of the military as an institution that might help us understand what they‘re doing here?

TELHAMI: It could. I doubt that really is a critical point right now. Everybody is fighting for their survival, and, you know, asserting themselves in whatever regime emerges.

The military in Egypt is going to be a central player in Egyptian politics for years to come. The Egyptian people expect them to, because they expect to have a strong country, and, traditionally, respect military institution.

So regardless, the military is going to be part of it. And in fact, the worst thing for them is to jeopardize the trust of the public in the short term.

The problem, of course, is you have the three tiers. You‘ve got the upper echelons. They are the president‘s best friends. You know, we talk about the military and the regime. Well, they are the regime.

You know, when President Mubarak met in the morning before these events with anybody for breakfast, it was really the secretary - the Minister of Defense Tantawi who is now deputy prime minister, and the chief of intelligence, now vice president, Oman Suleiman.

So these are his top friends. But in the middle of all those officers, always professional, well-trained, the rank-and-file are really of the people. So the military itself is very complicated.

And in an environment like this, where everyone that every segment of society is out there on the streets in large numbers, they have to be part of this. And then, there were reports of officers taking their uniforms off and joining the demonstrators.

So they have to worry about the loyalty of their soldiers in that environment. But I have to tell you something. You know, when I‘m looking at this, and I see the empowerment, I see the pride of being an Egyptian. People have tasted it. They have already won.

It might take a day or two or a week or two. They have already won. But this scene of winning peacefully the way they have, this is Bin Laden‘s nightmare. What we‘re seeing here is Bin Laden‘s nightmare.

And if they fail, it will be our nightmare. Because there is a public empowerment, they expect change. It will be unbelievable if it could be achieved against the message of militancy through peaceful means, of people just demanding their freedom publicly and gaining it. And if they fail, we‘re in for a lot of trouble.

MADDOW: Shibley Telhami, Anwar Sadat professor for peace and development at the University of Maryland, fellow at the Brookings Institution, thank you for joining us this evening, sir. Your insight is invaluable.

TELHAMI: My pleasure.

MADDOW: Their despised president told them he‘s staying and their vice president told them to go home and stop watching TV. How today‘s officials‘ speechifying ploy to the protesting crowds with a live report from those protesting crowds, next.

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MADDOW: Half an hour before Egyptian President Hosni Mubarak gave his “I‘m not resigning, I‘m just delegating some of my duties to my new vice president” - half an hour before he gave that speech.

Our next guest could hear protesters singing the Egyptian national anthem from Tahrir Square a mile away. The protesters, at that point, had been told by the military that their demands would be met.

And then came President Mubarak‘s speech. And since the protesters‘ main demand was that Mr. Mubarak step down, when it became clear that he wasn‘t actually going to, this is what happened. Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE REPORTER: A carnival-like atmosphere has turned to one of anger and resentment.

AYMAN MOHYELDIN, AL-JAZEERA REPORTER: They have been saying the slogan that has come to symbolize the demands of the people in Arabic - houei em shi(ph), which means “he must leave” or “he shall leave.”

HODA ABDEL HAMID, REPORTER: They didn‘t listen to the end of the speech. Halfway through it, when they realized that actually President Mubarak was not going to step down, they started chanting again, going, “Go, go. Leave, leave. Depart, depart.”

(END VIDEO CLIP)

MADDOW: Joining us now from Cairo, Al-Jazeera reporter, Ayman Mohyeldin, who has joined us a couple of times in our coverage. Ayman, thank you very much for joining us. Appreciate you staying up through this horrible hour.

MOHYELDIN: My pleasure.

MADDOW: Did it make sense that the protesters and a lot of other people around the world were expecting President Mubarak to step down? In retrospect now of the reasons that that was the expectation, are they reasons that make sense?

MOHYELDIN: Yes, absolutely. When you look at the public mounting pressure, both domestically and internationally, when you look at some of the key indications that became apparent throughout the course of the day from the military, that communique.

And one of the most overlooked things so far has been the statement that came out from the secretary general of the ruling national democratic party.

Now, he was quoted by various media outlets, including the state-owned “Al-Ahram” newspaper as saying that the president had been asked to step down or transfer his powers, and that, in fact, he was going to answer the demands of the people before Friday.

Now, when you look at what that means, the demands of the people have been very clear from the very beginning, and that is that President Hosni Mubarak must step down.

There was a lot of evidence to suggest that is exactly what was being prepared to happen, that communique from the military suggesting that the supreme council of the armed forces was going to convene regularly, also a very important indicator.

Unfortunately, in the eyes of the protesters, it certainly did not materialize, based on all the evidence that was coming out earlier in the day.

MADDOW: Ayman, do you have any reporting, any indication of what might have happened between all of those things that you‘re just describing there, which we are reporting on here as well, and the evening when Mr. Mubarak actually did not step down.

Is there any indication yet of what might have changed between those two events?

MOHYELDIN: Well, at this particular stage, it‘s very difficult. We‘re getting a lot of analysis from different people close to the military, you know. And the military in Egypt is a very closed-knit society.

It is a very close group of officers, very difficult to gauge their reaction. But I can assure you one thing, from many of the people I‘ve been speaking to, is that the military, just like the rest of Egypt, is very much divided on what to do.

Some of the senior leadership of the military are very loyal to President Mubarak. Some of the younger officer corps, most trained in the west, spent a lot of time in the U.S., have very different opinions.

But because the military is so closed-knit, it‘s very difficult to gauge the initial response. But some of the analysis suggests that, in fact, President Mubarak was playing both sides of the military, and the vice president, without giving a clear indication as to who would emerge with that authority.

Well, by the end of the day, we certainly learned that the vice president had been given the authority or at least some of the responsibilities. And there‘s some indication that really caught the military by surprise.

The military had essentially gone on the footing that it was prepared to assume more responsibility, perhaps play a bigger role. The fact that it was not and somewhat shunned aside is going to be a very interesting development to see what happens in the next 24 to 48 hours in terms of how they respond on the street.

MADDOW: Ayman, the Egyptian ambassador to the United States told me tonight this hour that not only is Mr. Suleiman in charge of the military. There is no split in the government and the military.

He told me any statements from the military today that were interpreted as being more supportive of the protesters than the statements had been in the past was just a misunderstanding, that the army‘s messaging has been consistent all along.

They‘re just saying the same sort of things they have been saying since the start of the uprising. Is that how you see it from Cairo?

MOHYELDIN: No, certainly not. The reality on the ground is very different than what the ambassador described. Now, there‘s no doubt that the ambassador perhaps is in touch with more regular elements of the military and perhaps the chain of command itself.

But all you have to do, really, is spend time out with the soldiers on the ground, some of the mid-to-senior-level officers that are in charge of some of these tank battalions that are out in the streets.

And you get really a sense of the general mood for the military. Now, one of the events that happened today that was of great interest was that a senior army officer who was in Tahrir Square, liberation square, put down his weapons, according to eyewitnesses and joined the protest.

He was certainly showered and embraced by the protesters around him. There is a lot of anecdotal evidence to suggest that the military is in and of itself somewhat divided about what role it should play.

We have seen that time and time again over the past several days. And the comments that are coming out of the military have suggested that it has come on the side of the protesters on more than one occasion.

The initial statements that came out that suggested that the military was not going to use force and more importantly, explicitly, that the protesters had legitimate grievances.

Those are strong indicators into the mindset of the military in terms of who it was supporting early on. That could have changed, but the indication and the evidence so far does not support the statements made by the ambassador so far.

MADDOW: What started off today as the expectation of a military coup has ended up at the end of the day as being sort of back where we started before today, wondering where the military goes, and whether or not that is, in fact, where the fate of Egypt lies.

You know what you really need on days of big international tectonic shifting like this? You need context. A big explanatory helping of context is coming up next.

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MADDOW: One of the signs today in Egypt that something big was happening was when Egyptian state TV started running with the slogan “Egypt is changing.”

I mean, everything is always changing in some gradual sense. But there are moments in the world at which there is abrupt, major change. Things bend and bend and bend and bend, and then, they break.

Since the Korean War, really, these breaks, these abrupt changes in power - they don‘t usually happen by war anymore. It‘s not always the case. We invaded Iraq and overthrew that government.

But generally speaking, in the last 50 years or so, governments have not been overthrown as a result of other foreign countries invading them. It‘s been popular uprisings. It‘s been military coups. It‘s been civil wars.

It‘s been internal struggles to overthrow either the person in power or the whole system of power. What‘s been so compelling to American audiences in particular about what‘s happening in Egypt is what the uprising there looks like, the character of it.

This didn‘t start with the military there. It didn‘t start with some Islamist faction. It didn‘t even start with organized political opposition. This is a popular and populist uprising of people who are through with the system they were living under.

Egypt is the cornerstone of the Middle East. Because of that, this is not just another international news turmoil story. This changes the world. But in terms of understanding what happens next, we do have a lot of precedent to consult.

If you squint, you can see what happened in Tahrir Square today in Berlin in 1989. You can see what happened in Tarhir Square today in the Philippines in 1986.

You can see happened in Tarhir Square today in Poland in 1989, in the republic of Georgia in 2003, in Iran in 1979, in Tunisia just last month, in Ukraine in 2004.

People rise up against bad governments. It happens, and it usually moves us as Americans when it does because of our own history.

But when you look at just that partial list of popular uprisings that overthrew governments, just in my living memory, just off the top of my head basically, those uprisings didn‘t all produce the same outcome.

From Islamic theocracy in Iran to the world‘s most robust secular capitalist economy in Germany to the halfway there democratic fragility of the Philippines today to the former Soviet bloc, cautiously capitalist growing democracies of Georgia and Ukraine and Poland, to the absolute uncertainty of what comes next in Tunisia, the people rising up and overthrowing their government is a process, not an outcome just like democracy, itself is a process and not an outcome.

There is not necessarily a connection between whether or not the uprising itself is peaceful and whether the outcome of that uprising is ultimately a citizen-led democratic government that represents the will of its people.

What happens next after these protesters in Egypt inevitably win is a test of whether or not a democratic society can bloom - can bloom essentially instantly after decades that were not democratic and that were not citizen-led.

Can they turn themselves into a polity? Can they do it? Can they pull it off? Stay tuned for a long time.

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MADDOW: It is now nearly 5:00 in the morning in Cairo, nearing the dawn of what promises to be a huge day of protests across Egypt after thousands gathered to hear what they thought would be President Mubarak‘s resignation today only to hear instead that while he was handing power to his vice president, Mr. Mubarak himself was not stepping down.

Our coverage continues on “THE ED SHOW.” Good evening, Ed.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.